How to Meet the Requirements for a Reverse Mortgage
TORONTO, October 28, 2021 (Newswire.com) - iQuanti: A reverse mortgage loan allows senior homeowners with significant equity in their homes to turn some of that equity into tax-free cash. A borrower can receive a reverse mortgage as a lump sum or fixed monthly payments — and sometimes a combination of these.
These loans don't require the borrower to make any monthly payments, although borrowers can make payments voluntarily. Instead, the entire amount becomes due if the borrower moves permanently, sells their home or passes away.
Borrowers must meet several requirements to qualify for this type of loan, listed below.
Why Get a Reverse Mortgage?
There are many reasons to consider a reverse mortgage.
Reverse mortgages are designed for Canadian homeowners 55+ who have substantial wealth tied up in their home equity. A reverse mortgage lets these homeowners access that equity without selling their homes.
Additionally, many homes may have appreciated in value over their decades of ownership — reverse mortgages let them access some of those potential investment returns.
Many reverse mortgage borrowers are either retired or very close to it. Their homes may offer them a source of retirement funds to supplement other sources of income or cover retirement-related expenses like regular bills or more frequent medical bills.
Homeowners can use reverse mortgages to get the funds they need if their credit might otherwise disqualify them from traditional loans.
Second Home/Vacation Home
Some seniors want a second home or a vacation getaway. Reverse mortgages offer them a way to afford one without taking out a second mortgage.
Reverse Mortgage Requirements
Reverse mortgages have numerous requirements borrowers must comply with.
Some of them must be met before the borrower gets their reverse mortgage. Others must be complied with throughout the life of the loan or the borrower may owe the reverse mortgage balance back.
Age: All borrowers on title of the property must be at least 55 years old.
Homeownership: The borrower(s) must be on the home's title.
Residency: The home must be the borrower's primary residence. They must live in the home and not live anywhere else for at least 12 consecutive months.
Mortgage status: Borrowers must either own their homes outright or have a mortgage balance lower than their reverse mortgage amount. Lenders may require borrowers to pay off remaining mortgages with reverse mortgage proceeds before taking the remainder for themselves.
Home type: The home must be a single-family or four-unit maximum multi-family property with the borrower living in one unit as their primary residence.
Upkeep: Homeowners must be able to afford property taxes, insurance, maintenance, and homeowner's association fees.
Debt: Borrowers can't be delinquent on any federal debt to qualify for a reverse mortgage.
The Bottom Line
For seniors with substantial home equity looking for a way to tap that equity while continuing to live in their homes, a reverse mortgage can be an option worth consideration.
Source: iQuanti, Inc.